1.1 Key statutes
The key statutes governing employment relationships in the People’s Republic of China are the Labour Law and the Employment Contract Law.
Historically, many employers in China have failed to put in place written contracts with employees, and have heavily utilised fixed-term contracts, especially those with shorter contract terms, in an endeavour to avoid certain employment obligations, in particular those relating to termination of employment and severance pay.
The Employment Contract Law is largely aimed at dealing with such practices. There is now a clear obligation to put in place written employment contracts and disincentives to using fixed-term arrangements. For example, employees have a right to an open-ended employment contract where they propose to renew, following two prior consecutive fixed-term contracts. Moreover, severance is now payable where the employment comes to an end due to the expiry of a fixed-term contract.
Other significant statutes include:
- the Implementation Regulation of the Employment Contract Law
- the Labour Disputes Mediation and Arbitration Law;
- the Trade Union Law; and
- the Law on the Prevention and Treatment of Occupational Diseases.
Governments at the provincial and municipal level have power to issue rules at the local level, including rules, regulations and notices.
1.2 Probationary period
Probationary periods are governed by the Employment Contract Law, which sets out the maximum probationary period depending on the length of the contract:
- 1 month for a contract for more than 3 months but less than 1 year;
- 2 months for a contract for more than 1 year but less than 3 years;
- 6 months for a contract of 3 years or more, or for an open-ended contract;
No probationary period may be set for a contract for less than 3 months or a task-based contract with its term to expire upon completion of the task.
The probationary period forms part of the contract term. During the probationary period, the employee’s wages must not be less than 80% of the minimum wage level for the same position with the employer, nor less than 80% of the wage agreed upon in the employment contract to apply after the probationary period, and must also be not less than the local minimum wage standard of the place where the employer is located.
If the employee does not satisfy the conditions for employment during the probationary period, the employer may terminate the employment contract without compensation, but must explain the reasons for termination to the employee.
1.3 Minimum wage
Minimum wages are set by the governments of provinces, autonomous regions or municipalities directly under the control of the central government. Minimum monthly wages apply to full-time jobs and minimum hourly wages apply to part-time jobs.
1.4 Remuneration structure
For full-time employees, wages must be paid at least monthly. For part-time employees, the wage payment period must not exceed 15 days.
There are no mandated bonuses required by law, however it is common in practice to pay a year-end bonus or an incentive bonus.
1.5 Working hours
Hours of work
The maximum working time prescribed by legislation is 8 hours per day and 40 hours per week.
Where an employer wishes to extend employee working hours due to production requirements, it may only do so after consultation with the trade union and the employees. The work hours can generally not be extended by any more than one additional hour per day, except in certain confined circumstances.
Pursuant to the Labour Law, if an enterprise cannot meet these maximum working time requirement due to the nature of the work, the enterprise may implement other arrangements upon the approval of the labour administration authorities. This is referred to as a non-fixed working hours system or a comprehensive working hours system.
Rest periods
Employees are entitled to at least 1 rest day per week.
Overtime
For employees working on a standard working hour system, in circumstances where the employer has lawfully arranged for working time to be extended (ie has met the consultation requirements), overtime work on a usual working day must be paid at the rate of 150% of the normal wages, overtime work on a rest day must be paid at 200% of the normal wages if no supplementary rest can be arranged, and overtime work on a statutory holiday must be paid at 300% of the normal wages.
According to the national regulations, the above overtime payment prescriptions do not apply to employers who have obtained government approval for a non-fixed working hours system in their enterprise. However, local practice in this respect may be different. (For example, in Shanghai, for employees working on a non-fixed working hours system, overtime work on a statutory holiday must also be paid at 300% of the normal wages.)
1.6 Public holidays
Employees are entitled to time off with pay on the following public holidays:
- Spring Festival (3 days);
- New Year’s Day (1 day);
- Qingming Festival (1 day);
- International Labour Day (1 day);
- Dragon Boat Festival (1 day);
- Mid Autumn Festival (1 day); and
- National Day (3 days).
Women are entitled to a half day holiday on Women’s Day and persons between 14-28 years are entitled to a half day holiday on Youth Day.
The government may adjust the prescribed public holidays from time to time.
1.7 Paid annual leave
In China, the quantum of the mandatory annual leave entitlement depends on the length of time for which the employee has been engaged in continuous work, but not necessarily with the same employer. For example, if an employer works for 9 years with Employer A and 1 year with Employer B, then Employer B will be required to recognise 10 years’ service for annual leave purposes, and hence the entitlement will be 10 days’ annual leave.
The minimum standards are:
- 5 days for an employee who has cumulatively worked for 1-10 years;
- 10 days for an employee who has cumulatively worked for 10-20 years; and
- 15 days for an employee who has cumulatively worked for 20 years or more
Accrued but untaken annual leave at the time of termination of employment must be paid out at the rate of 300% of the employee’s daily wage.
1.8 Other types of leave
Maternity leave
Female employees are entitled to 90 days’ maternity leave, including antenatal leave, which must be at least 15 days.
Medical treatment period
If an employee is unable to attend work due to illness or non-work related injury, they are entitled to a statutory medical treatment period, up to a maximum of between 3-24 months, depending on their length of service. During the medical treatment period, the employer must pay the employee in accordance with the provisions of local regulations.